Unfair Terms in Consumer Contracts: a new ... - Law Commission

But there is an important “distinction between the term or terms which
express the substance of the bargain and ‘incidental’ (if important)
terms which surround them” … The object of the regulations and the
directive is to protect consumers against the inclusion of unfair and
prejudicial terms in standard form contracts into which they enter, and
that object would plainly be frustrated if reg 3(2)(b) were so broadly
interpreted as to cover any terms other than those falling squarely
within it. In my opinion the term, as part of a provision prescribing the
consequences of default, plainly does not fall within it. 18
4.15 Lord Steyn agreed that the term was not exempt because it was a “subsidiary
term”. The exemption should be given “a restrictive interpretation” because:
in a broad sense all terms of the contract are in some way related to
the price or remuneration. That is not what is intended. Even price
escalation clauses have been treated by the Director (sic) as subject
to the fairness provision … It would be a gaping hole in the system if
such clauses were not subject to the fairness requirement. 19
4.16 The House of Lords went on to assess the term for fairness and found that it was
fair.
THE 2002 CONSULTATION PAPER
4.17 In our 2002 Consultation Paper we described exempt terms as “core terms”
because they are intended to reflect the core bargain. We considered the
exemption in detail, looking at whether it was needed at all, the meaning of plain
intelligible language and how it compared with the Unfair Contract Terms Act
1977 (UCTA).
Is the exemption needed at all?
4.18 We noted that there were problems in defining the scope of the exemption. One
possibility would be to follow those Member States such as Spain who have not
included the exemption in their legislation. 20 We decided against such a course.
Even in relatively competitive markets, prices may vary significantly, and there
would be too much scope for argument. We thought that the courts and
enforcement bodies would be drawn into arguments on what the price should be,
and that they would not be well equipped to deal with these. 21 Instead, we
proposed to add to the definition to make “the concept of a core term rather more
concrete”. 22
18 th
Above at [12] by Lord Bingham. The quotes are taken form Chitty on Contracts (28 ed
1999).
19 Above, at [34] by Lord Steyn.
20 Unfair Terms in Contracts (2002) Law Commission Consultation Paper No 166; Scottish
Law Commission Discussion Paper No 119, para 4.56. We noted that Denmark, Finland,
Greece, Luxembourg, Portugal, Spain and Sweden did not include the exemption.
21 Above, para 4.63.
22 Above, para 4.59.
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